Gold had a good year in 2023 and many observers expect 2024 to be another good year for gold. Indeed, long-term interest rates are likely to continue to fall against a backdrop of sluggish inflation and economic activity under pressure, two phenomena which should prompt major Western central banks to lower their key rates. However, the Federal Reserve (Fed) and European Central Bank (ECB) rate cuts, which the market expects to begin between March and summer, are already widely anticipated. The real question, then, is the timing and, above all, the scale of the rate cuts. In this respect, French professionals at Comptoir National de l'Or (CNG) suggest the possible scenario of a rate cut ‘later but more significant than expected’, which would support the rise of gold prices in the second half of the year.
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Most major banks expect new all-time highs for gold
JPMorgan forecasts new record highs for the price of gold (its strongest conviction, among the various metals) in 2024, with a target of $2,175 per ounce by the end of December. BNP Paribas also expects new all-time highs. Similarly, Wells Fargo expects gold to rise into the $2,100-2,200/oz range. More cautiously, Lombard Odier expects prices to fall in the first half of the year, before returning to the 2,100-dollar-an-ounce level (already briefly reached last December) in mid-2024. For its part, Morgan Stanley takes a gloomier view, deeming gold overvalued.
What gold price catalysts should an investor be looking out for this year?
The tone and monetary policy of central banks (notably the Fed and ECB) will continue to focus investors' attention, for the reasons outlined above. The expected fall in real interest rates will have to materialize, or gold prices will come under pressure, warns Comptoir National de l'Or. While Western central banks are expected to take a hard look at their monetary policy, those in emerging countries will be keeping a close eye on their gold purchases.
In 2023, the increase in central bank gold reserves was also underpinned by the de-dollarisation of their holdings and investment in a neutral asset not subject to sanctions’, notes Comptoir National de l'Or. In this respect, China - currently in a cold war with the United States - was by far the biggest buyer of gold, with 225 tonnes, followed by Poland (+130 tonnes) and Singapore (+77 tonnes). Gold purchases are set to continue into 2024, although the pace ‘could be a little slower’, warns Comptoir National de l'Or.
Gold could also benefit from its safe-haven status in the event of a political or geopolitical shock, as 2024 promises to be a high-risk year in this respect. How will the war between Ukraine and Russia evolve? And the one between Hamas and Israel, whose repercussions are currently spreading to the Red Sea (the Houthis and Iran are proving to be very aggressive)? Will China decide to invade Taiwan, in defiance of repeated warnings from the United States? And who will emerge victorious from the American presidential elections?
Gold could also play its role as a safe-haven asset in the event of market disorder, or even a financial crisis, which ‘could arise from excessive indebtedness, either in the real estate sector or on the part of governments themselves’, believes Comptoir National de l'Or, for whom gold seems well placed to play its traditional role as a portfolio diversification asset, a store of value, and a safe-haven asset in the face of ‘ever-increasing’ risks.
This article was adapted from Capital FR
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Sources:
Yahoo! Finance: What Will Happen To The Gold Price In 2024 – Octa Forecast
JP Morgan: Will gold prices hit another all-time high in 2024?
